Shares take fright as UK, US growth falters

Shipping containers are off-loaded at the Port of Miami in Miami - imports rose but exports faltered in June.Photo: AP

4:33PM BST 11 Aug 2010

The Dow Jones fell 2.2pc - or 229 points - to 10415 at one stage in early trading as investors digested the gloomy data which came on top of downbeat assessment of the US economy by the Federal Reserve on Tuesday. The S&P 500 shed 2.6pc and the Nasdaq 2.9pc.

A surprise 18.8pc rise in the US trade deficit in June to the highest level in 20 months and imports of foreign consumer goods hit an all-time high, suggesting that second-quarter US growth was much weaker than previously thought.

The monthly trade gap totaled $49.9bn (£31.9bn), the highest since October 2008, the Commerce Department reported on Wednesday, as US exports stumbled a bit.

"The strength in imports, though hinting at some pickup in consumer spending, continues to undermine GDP growth. Moreover, the slowing in exports will only fan fears of a faltering US recovery," said Sal Guatieri, senior economist at BMO Capital Markets.

London's FTSE 100 lost 2.4pc to close at 5245.21 as the Bank of England joined the Fed in warning that the recovery has slowed.

Bank and mining shares were the hardest hit as the central bank said UK interest rates would remain low for longer in its August Inflation Report and it lowered its growth forecasts for next year to 3pc from 3.6pc.

France's CAC and Germany's DAX were down 2.7pc and 2.1pc respectively.

The falls followed a steep 2.7pc drop in Tokyo's Nikkei index as a stronger yen increased fears about the longer-term prospects for Japan's economy.